I am writing this post to alert you to the pitfalls when seeking a trading method, or a trading mentor. If you have been reading this blog you will know I was quite pleased to have found myself a mentor back in June 2010. I found him on a great trading community website called Forex Factory – many of you reading this will know about it. I have a lot of respect for Forex Facotry, they provide some great market information and have a community of experienced and intelligent forex traders. Have a look on there and look up the following members:

james16, jacko, BeachBum, DarkStar, hanover, PeterCrowns, mbqb11, trader888, BillyRayValentine, diallist, smjones, TheRealThing.

I recommend you look them all up and read all of their posts with the exception of one. Do not read the posts of my mentor, jacko. Jacko (aka. as Wayne Jackson) managed to gain himself a high reputation on Forex Factory with sheer luck and guile. Many people vouched for him using the vouching system because he “seemed” to be a selfless contributor and a good trader. It turns out he is a scammer. His trading method attracted me because it seemed so simple and I believe in trying to keep things simple. As Einstein said:

Everything should be made as simple as possible, but no simpler.

I really believe in that, it applies to so many areas of life – in programming, planning, general life, trading. Keeping things simple makes life easier and clearer.

Jacko’s method

Anyway, back on topic. Jacko’s method was simply this:

1. Only trade one currency pair, EURUSD
2. Only trade one chart time frame, the four hour.
3. Define the trend by asking a five year old if it’s going up or down (I’m not joking), draw a diagonal trend line.
4. If it’s going up then buy on pullbacks to support and leave a trailing stop in place
5. If it’s going down then sell on rallies to resistance with a trailing stop.
6. Leave the trade until the trailing stop is hit.
7. If the stop is hit then wait for price to go another 50-100 pips and then place an order to buy/sell in the direction of the original trade where you got stopped out. Jacko called this the anti-hedge method – I have no idea why because the term is meaningless, it has nothing to do with hedging. It’s not even anti-hedging.

That’s it, Jacko’s method. Now, when he started posting on forex factory he seemed to come across as a benevolent man sharing his “secret” and gained a large following. Now, why did he gain a large following? The EUR/USD had a very long uptrend which Jacko simply bought into over and over again. He was lucky and it appeared on the forums that this guy had a rare talent.

Turtles

Some time later he announced that he would be starting up a mentoring service similar to the famous turtles of the 1980s and they became known as Jacko’s turtles. Here’s some background on the turtles:

The Bet: Richard Dennis and William Eckhardt Create the Turtles

Picture an oak-paneled English drawing room. Two obviously wealthy gentlemen sit in their armchairs facing a roaring fire, puffing on their pipes and discussing their philosophy of trading. It is my proposition, Colin, that anyone can be taught to be a superior trader. There is nothing magical about it. There is no rare talent involved. It is simply a matter of being taught the appropriate rules and following those rules. There is no question in my mind that I could train virtually anyone to make a fortune trading. That is nonsense, Duncan. You just think your trading success is due to your system. What you do not realize is that you have a special talent. You could print out your rules in twelve-inch-high letters and have people read them every day for a year, and they still would not be able to do what you do in the markets. Your success is a function of your talent. It cannot be taught! Well, Colin, this must be the hundredth time we’ve had this discussion. Let’s settle it once and for all. Why don’t we just pick ten people, teach them my system, give them each 1 million to trade and see what happens. That’s an excellent idea, Duncan. Pick your ten people, train them, and if by the end of one year they are not ahead, on average, by at least 25 percent–a modest figure considering that you normally make two to three times that per year–you pay me 1 million. If they are up by more than 25 percent, I will pay you the same amount. Duncan and Colin then proceed to the window, watching the passersby for potential candidates for their experiment. Each time they agree on an individual, they send their butler out to summon the person.

– The above may sound like a fanciful plot for a story or movie. (Actually, it is a very loose adaptation inspired by the delightful Mark Twain story, The 1,000,000 Bank-Note.) However, change the setting from London to Chicago, eliminate the monetary element of the bet, and substitute a more sophisticated method for screening candidates, and you actually have a true story. The legendary trader Richard Dennis, who reputedly transformed an initial stake of several thousand dollars into a fortune estimated at $200 million, essentially had the same argument with his partner, William Eckhardt. It was Dennis’s contention that trading success could be taught, while Eckhardt scoffed at the idea.

Jacko Turtles

Jacko did a similar thing on Forex Factory – I don’t think he coined the term, maybe one of his followers did, but the group he created was known as the Jacko turtles. The idea was that he would create a private blog with a list of all of his trades and the reasons for taking the trades and would also send an SMS message to each turtle alerting them when he placed an order in the market. He started charging $500 per year for this service and made out that it was severely limited and only a few people would be allowed to join.

For the first year it seemed to go very well because the market was strongly trending on the H4 time frame and the turtles seemed happy. Jacko then announced that he would start a second group of turtles and the fee went up to $700 per year. He seemed to get a lot of support on Forex Factory and all was well. Shortly after this he announced that due to demand and with a suggestion from his “broker”, “Mark” he should start a fund. This is where the scam really starts. Not only was he taking $700 per year from God knows how many people for trading “education”, he was using the turtles as a pool of people he could draw large amounts of capital from. Some people in this pool gave him upwards of $100K and it’s quite possible that he could have made over $1m from this pool. I didn’t give him any money because I wanted to learn how to trade my own account, I wasn’t interested in giving a large some of money to someone I didn’t know very well.

Something’s not right

I joined the second group in July 2010 and a week after I joined Jacko announced that he was closing the fund and would stop writing the blog 12 months from July:

A SPECIAL MESSAGE FROM JACKO

In November 2007, I started this blog. It has been a rewarding two and a half years.
On August 8, 2008, I started the Managed Fund. As we come up to the second anniversary of the Fund, I have had to make a hard decision. Do I want to rapidly expand the Fund (as Mark could easily do, and would like me to do) or not. The Fund has performed very well, especially in its first year, when it produced exceptional positive returns while every other asset class (property, stocks bonds etc) were losing 50% of their value due to the Financial Crisis of 2009. It has continued to perform reasonably well this year.
However, I have come to the conclusion that, while I have enjoyed the experience of growing the Fund, I do not need, or want, the time consumption of developing another large and growing business over the next couple of years. I am at the stage of my life when I want to spend every day as if it were my last. (If I was 30 years younger I would attack this business with full gusto).
Having developed and sold two very large businesses previously in my business life, plus some smaller ones, it seems that I have a talent for building successful businesses. I was happily retired before I found forex and Mrs Jackson wishes to revert to that life with me trading just my own account.
Also I have found that, in these deteriorating economic times, the weight and responsibility of managing other people’s money has been making me trade too cautiously and has impeded my own trading ability.
As a result of the above, I am closing the Fund and remitting the balances to each investor. We will be doing his in an orderly manner.
We will be be asking each of Mark’s large investors to forward their bank details and closing their accounts during July.
For each of the investors from the Jackson trading group, we will be asking them to forward their bank details in early August. (Please see the JacksonFortressMembers website for more details. I will be updating it later today).

Furthermore, I have decided to continue the blog for only the next 12 months. I am not accepting any new members from today and, as many of you are aware, I have not been sending any renewal notices for the last six months. (I have been considering my decision as to the blog for some time). I will allow everyone to stay free of any renewal charge until the blog is closed.

His performance in the year prior to this announcement was shocking. In fact, me as a total newbie, wet behind the ears trader, managed to trade better than Jacko did in the past year. His trading was full of hesitation, doubt, mistakes, changing of rules constantly and regret and emotion. All the things you DON’T want to see in a mentor. So at this point, after only a week, I decided to ask Jacko for a refund of my $700. A couple of weeks went by and I did not get a reply, I sent a further four emails over the next four weeks and did not get one reply. I thought that was a little odd, because he had been very responsive and cordial before he had my money.

I then did some research on Forex Factory and was dismayed to learn that the investors had not been receiving their money and that Jacko was not replying to them either. Some of these people had given Jacko tens of thousands of dollars and were getting quite desperate and angry. I now know that the police, Interpol and various people are on to him to try and find out where he has disappeared to. The odd thing is that the private blog is still being updated but the writing style has changed leading me to believe it is a different person updating the blog. On the private blog, Jacko wrote this:

MESSAGE FROM JACKO 658

It is 1.00am NY time Thursday August 12 and the market is at 1.2875.

My buy trade at 1.3020 was stopped out by my Stop Loss at 1.2920. The AH trade order to buy at 1.2920 was placed when the market dropped 50 pips below my stop out price of 1.2920 at 1.2870. I am now waiting for the AH trade to be activated.

Yesterday, I had the joy of finding out that a couple of the final fund payouts to the small investors from the trading group were “diverted” by a (now) ex-employee. I am now resolving the issue and remedying the situation. It just proves again to me that trading by yourself is far better than any other business where you are relying on staff.

Yeah right.

If you are interested in learning more then look up Jacko’s thread on Forex factory and go to the end. There are a few quotes from that thread that are interesting, a guy called wwwin said this:

Well, this guy was really brazen, not only did he name the thread pleasure and pain…but it turns out that the Urban dictionary says that being jackoed means being defrauded…there you go, laughing at you from Tahiti, Figi or some other paradise, with 3 million in the bag… this Jacko is brazen
http://www.urbandictionary.com/defin…m=jacko&page=2

I know it’s a sad state of affairs, but the irony of this post made me smile.

Caveat Emptor

So to wrap up then, the moral of the story is Caveat Emptor and I doubt I will get my $700 refunded. As one person said on the Jacko thread on Forex Factory:

There’s always free cheese in a mousetrap.

I want to look forward now and focus on the new method of trading using scale-ins and scale-outs and try to forget about the whole Jacko experience. I will not write any new posts on Jacko but may update this post later if any further developments arise. I’ve saved his entire private blog on my computer for future reference if need be.

UPDATE: 25-Aug-2010

Twee, the site manager of Forex Factory posted an interesting message on Forex Factory today.

Hi Folks, after making the first post about this situation the FF team decided to give Jacko some time to show up and clear his name before we took any action. Jacko is still missing so we’re ready to give him the scammer treatment and ban him. However, we’re not yet going to move this thread to the Recycle Bin so it can serve as a visible warning to others who are considering giving money to a commercial operator.

Unfortunately banning Jacko is all we can do in this situation. We don’t know who Jacko is, we’ve never worked with him or even talked to him, but he did leave digital artifacts that could help in an investigation. We are happy to release this information to the proper authorities or attorneys representing investors. We will not release this information to anyone but authorities or attorneys representing investors. To request the information, please contact us by clicking ‘Contact’ in the footer. We may post some of this information publicly in the future depending on the legalities.

It really saddens our team to see so many people hurt so badly by Jacko, especially on our bandwidth. We are against commercial operators because we believe 99.99% of them are either a scam or offer little value. We give a lot of leeway to the experienced traders on this forum who aggressively challenge the commercial operators because we believe they are doing a great service for the community. Nowhere else on the forum do we allow such harassment to take place. However, we’ve employed a policy that says to extract bickering and overboard challenges once the thread gets too hot (i.e., too many Cleanup Reports coming in). We did this to appease the followers, not the commercial operator they were defending. We’ve learned our lesson with Jacko and we are no longer going to extract arguments from Commercial Forum threads unless it’s extremely hostile or in bad taste. We will generally ignore heat coming from followers.

If you have any further ideas on how we can avoid situations like this please contact us or post your thoughts here.